Heineken Malaysia BHD: Net Profit Growth of 13.3% YOY in 3Q24

Business Description

Heineken Malaysia BHD is a market leader in the malt liquor market, driven by key brands such as Tiger, Heineken, and Guinness Anchor. The company’s core business operations include brewing, marketing, and selling a range of beer and stout products. Heineken Malaysia primarily operates within the Malaysian market.

Industry Position and Market Share

Heineken Malaysia holds a substantial market share of approximately 60% in the Malaysian brewery sector. Despite a slight decline in revenue share by 0.9ppt qoq and 2.4ppt yoy in 3Q24, the company remains a benchmark for the industry. The decline is attributed to aggressive brand reinvestments and price hikes by competitors.

Revenue Streams and Competitive Advantage

The company’s revenue streams are primarily derived from beer sales, with brands like Tiger and Heineken contributing significantly. Heineken Malaysia benefits from an extensive distribution network and strong brand recognition, giving it a competitive advantage in the market.

Financial Statement Analysis

Income Statement

Heineken Malaysia reported a net profit growth of 13.3% yoy in 3Q24, with core net profit at RM97.8m (+12% yoy). Revenue for 3Q24 was RM619.0m, representing a modest 3.2% yoy growth. Operating profit grew 11% yoy due to prudent cost control.

Balance Sheet

As of 31 Dec 2024, Heineken Malaysia’s total assets stood at RM1,342m. The company maintains a strong equity position with a shareholders’ equity of RM40m. The net debt to equity ratio is projected to be 35.4% for 2024.

Cash Flow Statement

The company’s operating cash flow for 2024 is forecasted to be RM416m. Financing activities include dividend payments of RM412m. Maintaining a strong cash flow despite significant dividend payouts demonstrates robust financial health.

Dividend and Earnings

Heineken Malaysia offers a solid dividend yield of 5.9-6.7% for 2024-26, based on a 100% payout ratio. The company maintains a steady growth in net profit, projected at RM412m for FY24.

Key Findings

• Net profit growth of 13.3% yoy in 3Q24.
• Strong market position with a 60% market share.
• Solid dividend yield of 5.9-6.7% for 2024-26.
• Effective cost management leading to improved operating profit margins.
• Focus on maintaining growth momentum through increased marketing efforts and cost optimization.

Report Date and Financial Year

The report is dated Wednesday, 13 November 2024, and covers the financial year 2024.

Special Activities

Heineken Malaysia aims to maintain its growth momentum in 4Q24 through enhanced marketing efforts and cost optimization, particularly ahead of the Chinese New Year celebration in January 2025.

Investment Recommendations

If Currently Holding the Stock

Investors holding Heineken Malaysia BHD stock should maintain their position. The company’s strong market position, effective cost management, and attractive dividend yield support a continued investment.

If Not Currently Holding the Stock

New investors should consider buying Heineken Malaysia BHD stock. The company’s solid financial performance, market leadership, and growth potential make it a compelling investment opportunity.

Disclaimer

This analysis is based on the financial report provided and does not constitute financial advice. Investors should conduct their own research and consider their financial situation before making any investment decisions.